Deck 13: Financial Statements and Closing Procedures

Question 1

Current assets are usually listed on a balance sheet in order of liquidity.

Answer 1

True

Question 2

The difference between net sales and the cost of goods sold is called the ____________________ on sales.

Answer 2

gross profit

Question 3

If the Income Summary account has a credit balance after revenues,and expenses are closed,the firm had a net income for the fiscal period.

Answer 3

True

Question 4

A gross profit percentage of 45 percent means that for every $1 of net sales,gross profit amounts to ___________________.

Question 5

When a firm experiences a net loss,the owner's capital is decreased.

Question 6

At the end of the period,the balance of the Accounts Receivable account is closed to the Income Summary account.

Question 7

Each reversing entry is the exact opposite of the related ____________________ entry.

Question 8

Current assets provide the funds needed to pay bills and meet expenses.

Question 9

Interest on notes payable would be listed in the Other Income section of a classified income statement.

Question 10

The adjusting entry to record depreciation should be reversed at the start of a new fiscal period to make subsequent financial record keeping easier.

Question 11

Each balance appearing in the ____________________ section of the worksheet is closed into the Income Summary account.

Question 12

The balance of the Sales Returns and Allowances account is reported as a selling expense in Operating Expenses section of a multiple-step income statement.

Question 13

The statement of owner's equity is prepared before the balance sheet so that the beginning owner's equity balance is available for the balance sheet.

Question 14

Cash,items that will normally be converted to cash within one year,and items that will be used up within one year are called ____________________ assets.

Question 15

The ____________________ of a building is the portion of the original cost that has not yet been depreciated.

Question 16

On a classified balance sheet,Accounts Payable would appear in the ____________________ section.

Question 17

The total of the operating expenses for the period is deducted from the gross profit on sales to determine the net income or net loss from operations.

Question 18

An adjusting entry was made for accrued salaries of $600 at the end of 2013.The adjusting entry was then reversed.To record the first payroll of 2014,which totaled $1,500,Salaries Expense should be debited for ___________________.

Question 19

After all adjusting entries are posted,the balances of the general ledger accounts should match the amounts shown in the Adjusted Trial Balance section of the worksheet.

Question 20

After the ____________________ entries are posted,the Sales account will have a zero balance.

Question 21

The balance of the owner's drawing account is

A) listed in the Other Expenses section of the income statement.
B) listed in the Current Assets section of the balance sheet.
C) used in the calculation of ending capital on a statement of owner's equity.
D) listed in the Operating Expenses section of the income statement.

Question 22

A total of $8,000 in supplies was purchased during the year.By the end of the year,the company had used up $5,300 of the supplies.The adjusting entry needed at the end of the year is:

A)

B)

C)

D)

Question 23

Which of the following statements is not correct?

A) The gross profit percentage is calculated by dividing the gross profit for the year by the net sales for the year.
B) The average inventory is calculated by adding the beginning inventory to the ending inventory and dividing the sum by 2.
C) A current ratio of 3.5 to 1 means that a firm has $3.50 in current liabilities for every $1 of current assets.
D) Working capital is the difference between total current assets and total current liabilities.

Question 24

The accountant of Randy's Flooring has closed all of the temporary income statement accounts.The accountant is now ready to close the Income Summary account.Using the Income Summary T-account below,determine the correct closing entry the accountant needs to make in order to close the account.

A)

B)

C)

D)

Question 25

Use the following account balances from the adjusted trial balance columns of RB Auto's worksheet to answer below question. Select the correct closing entry that RB Auto would make to close the owner's withdrawal account at the end of the accounting period.

A) debit R.Holloway,Drawing $500 and credit Income Summary for $500.
B) debit Income Summary $500 and credit R.Holloway,Drawing for $500.
C) debit R.Holloway,Capital $500 and credit R.Holloway,Drawing for $500.
D) debit R.Holloway,Drawing $500 credit R.Holloway,Capital for $500.

Question 26

An income statement that has one total for all revenues and one total for all expenses is known as a

A) classified income statement.
B) multiple-step income statement.
C) single-step income statement.
D) categorized income statement.

Question 27

On Mar.1,Brown's Antiques paid $18,000 for 12 months of advance rent on its store and immediately debited an asset account for the full amount.Select the adjusting entry made on December 31,to record the amount of rent that had expired.

A)

B)

C)

D)

Question 28

The beginning capital balance shown on a statement of owner's equity is $43,000.Net income for the period is $18,000.The owner withdrew $22,000 cash from the business and made no additional investments during the period.The owner's capital balance at the end of the period is

A) $39,000.
B) $47,000.
C) $61,000.
D) $83,000.

Question 29

Use the following account balances from the adjusted trial balance columns of RB Auto's worksheet to answer below question. Select the correct closing entry that RB Auto would make to close their expense account(s)at the end of the accounting period.

A) debit Salary Expense $4,000;debit Rent Expense $3,000;debit Purchases $2,000 and credit Income Summary $9,000
B) debit Income Summary $9,000 and credit Salary Expense $4,000;credit Rent Expense $3,000;credit Purchases $2,000
C) debit Income Summary $9,000 and credit R.Holloway,Capital for $9,000
D) debit R.Holloway,Capital $9,000 and credit Salary Expense $4,000;credit Rent Expense $3,000;credit Purchases $2,000

Question 30

Use the following account balances from the adjusted trial balance columns of RB Auto's worksheet to answer below question. Select the closing entry that RB Auto would make at the end of the accounting period to close their revenue accounts and income statement accounts with credit balances.

A) debit Sales and credit Income Summary for $15,000.
B) debit Income Summary for $15,000 and credit Sales for $15,000.
C) debit Sales and credit R Holloway,Capital for $15,000.
D) debit Sales $15,000;debit Purchase Returns and Allowances $200 and credit Income Summary for $15,200.

Question 31

Which of the following statements is correct?

A) The term single-step income statement is sometimes used to describe a classified income statement.
B) If a business is to earn a net income,the gross profit on sales must be greater than operating expenses.
C) Salaries of office employees would be grouped with the selling expenses in the Operating Expenses section of the income statement.
D) Sales less Operating Expenses equals Gross Profit.

Question 32

Use the following account balances from the adjusted trial balance columns of Goody Chocolate's worksheet to answer below question. Using the adjusted trial balance above,select the correct closing entry that Goody Chocolate would make to close their revenue accounts (and other temporary income statement accounts with credit balances)at the end of the accounting period.

A)

B)

C)

D)

Question 33

The beginning capital balance shown on a statement of owner's equity is $86,000.Net income for the period is $36,000.The owner withdrew $44,000 cash from the business and made no additional investments during the period.The owner's capital balance at the end of the period is

A) $78,000.
B) $94,000.
C) $122,000.
D) $166,000.

Question 34

Which of the following is not a current asset?

A) Accounts Receivable
B) Prepaid Insurance
C) Merchandise Inventory
D) Equipment

Question 35

The beginning capital balance shown on a statement of owner's equity is $100,000.Net income for the period is $50,000.The owner withdrew $25,000 cash from the business and made no additional investments during the period.The owner's capital balance at the end of the period is

A) $175,000.
B) $150,000.
C) $125,000.
D) $100,000.

Question 36

Use the following account balances from the adjusted trial balance columns of Goody Chocolate's worksheet to answer below question. Using the adjusted trial balance above,select the correct closing entry that Goody Chocolate would make to close the expense accounts (and cost of goods sold accounts with debit balances)at the end of the accounting period.

A)

B)

C)

D)

Question 37

Gross profit on sales is calculated by subtracting

A) sales returns and allowances from sales.
B) cost of goods sold from net sales.
C) ending inventory from the total merchandise available for sale.
D) total expenses from sales.

Question 38

Prepaid expenses appear in the

A) Operating Expenses section of the income statement.
B) Other Expenses section of the income statement.
C) Current Assets section of the balance sheet.
D) Current Liabilities section of the balance sheet.